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China insists its market must be factored in iron ore pricing

File photo: An iron ore mine. Higher iron ore prices hurt steel mills profits in 2005 as Chinese overproduction forced steel prices sharply lower. But demand has risen sharply again this year, again buoying iron ore prices.
by Staff Writers
Shanghai (AFP) May 18, 2006
China insisted Thursday that its domestic market conditions must be taken into consideration over stalled annual contract pricing negotiations for key steel-making commodity iron ore.

"In setting the price for China's iron ore imports, negotiators must not only consider the situation in Europe, but also in Asia -- and particularly here in China," the official Xinhua news agency quoted a spokesperson from the Chinese steel association as saying.

"If the mining side fails to do this, Chinese steelmakers will find it unacceptable."

The dispatch follows a deal struck this week between Germany's largest steelmaker, ThyssenKrupp AG, and Brazil's Companhia Vale do Rio Doce -- the world's largest iron ore miner -- for a 19-percent increase this year for iron ore prices from a year ago.

Analysts have said the agreement is now likely to become the global benchmark until early 2007, when the contracts will be renegotiated.

In the past Japan and sometimes Europe took the lead in negotiating annual contract pricing.

But with its economy booming, China, the world's largest consumer of iron ore, was keen to take a bigger role in the setting of raw material prices.

Baosteel, which is heading the discussions for all Chinese firms, wanted to secure the cheapest possible price from the world's three largest exporters -- Australia's Rio Tinto, Anglo-Australian miner BHP Billiton and Companhia Vale do Rio Doc.

But now ThyssenKrupp AG has stepped in ahead of it and agreed to pay much more than the 10 percent hike that Baosteel was reportedly seeking.

Higher iron ore prices hurt steel mills profits in 2005 as Chinese overproduction forced steel prices sharply lower. But demand has risen sharply again this year, again buoying iron ore prices.

Related Links

Pressure builds on China after Japan Australia iron ore price deal
Sydney (AFP) May 18, 2006
Mining giant Rio Tinto announced Thursday that major Japanese steel mills had agreed to a 19 percent hike in iron ore prices putting pressure on resource hungry Chinese mills to do the same.

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